Claim Notional Input VAT & Cut Business Costs

As a valued client of OnQ Accounting and Tax Services, we aim to keep you informed about opportunities to optimise your tax position. One such opportunity is the claim of notional input Value-Added Tax (VAT) when acquiring second-hand goods from non-VAT registered suppliers. Many businesses overlook this potential benefit, resulting in missed tax savings.

Understanding Notional Input VAT

Notional input VAT allows VAT-registered vendors to claim input tax credits on second-hand goods purchased from non-VAT registered individuals or entities. This mechanism ensures that VAT is accounted for in the supply chain, even when the seller isn’t registered for VAT.

When Can Notional Input VAT Be Claimed?

You can claim notional input VAT under the following conditions:

• Purchase from a Non-VAT Registered Supplier: The goods must be acquired from a supplier who is not registered for VAT.

• Intended for Taxable Supplies: The goods should be intended for use in making taxable supplies in the course of your business.

• Goods Qualify as Second-Hand: The items must meet the definition of ‘second-hand goods’ as per the VAT Act.

How to Claim Notional Input VAT

To successfully claim notional input VAT, adhere to the following steps:

1. Complete the VAT 264 Form: This form serves as a declaration for the supply of second-hand goods. Ensure all sections are filled out accurately, capturing details of both the supplier and the goods.

2. Maintain Comprehensive Records: Retain the completed VAT 264 form and any supporting documents, such as proof of payment and descriptions of the goods. These records are essential for verification purposes.

3. Calculate the Input Tax: The notional input tax is calculated as the tax fraction (15/115) of the lesser of the purchase price or the open market value of the goods.

4. Report in the Correct Tax Period: Claim the notional input VAT in the tax period when payment for the goods is made.

Special Considerations for Fixed Property

When dealing with second-hand fixed property, it’s crucial to note that transfer duty paid is not included in the calculation of notional input tax credits. This clarification was provided in SARS’ Binding General Ruling 57.

Recent VAT Rate Changes

Please be aware that, as per the National Treasury’s announcement on 12 March 2025, the VAT rate will increase from 15% to 15.5% effective 1 May 2025, and to 16% from 1 April 2026. Ensure your systems and calculations are updated accordingly.

Conclusion

Claiming notional input VAT on qualifying second-hand goods can result in significant tax savings for your business. However, it’s essential to follow the correct procedures and maintain thorough documentation to support your claims. If you require assistance or have questions regarding notional input VAT, please contact our team at On Q Accounting and Tax Services..